The Irish Minister for Finance Michael Noonan has struck a deal with the European Central Bank to avoid the repayment of $4.1 billion in Anglo Irish Bank debt which was due at the end of the month.
Noonan and the Irish government have been in protracted negotiations regarding Ireland's debt with the EU/ECB/IMF trinity since last September.
According to a report in the Irish Independent, the $4.1 billion Anglo promissory note has been replaced by a Government bond that will not be due for repayment until 2025, taking some political pressure off the Irish coalition government, who are already faced with stretched public finances and unprecedented banking debt.
Observers say the deal will provide a boost for the government ahead of the annual Fine Gael party conference to be held this weekend, and could soften the national controversy over a new $133.00 household charge.
As part of the new deal Anglo - which is now known as Irish Bank Resolution Corporation (IBRC) - debt will technically be repaid and there will be no default.
'Put simply, $4.1 billion in cash will be settled by delivery to IBRC of a long term Government bond with an equivalent fair value,' Noonan said in the Irish Parliament this week.
'Ultimately, it is intended that this long term Government bond will be financed for one year, on commercial terms, with Bank of Ireland who may in turn refinance the bond with the ECB. While this transaction has been approved by Bank of Ireland's board it remains subject to the approval of the Bank of Ireland shareholders. Pending the result of the shareholders' meeting, the financing of the bond will be a collateralised facility provided by the National Asset Management Agency (NAMA) to IBRC on equivalent commercial terms as the financing with Bank of Ireland,' Noonan added.
Noonan told the Independent that the settlement removes the need for the government to dip into its $113 bailout fund and pay cash.
'There is a significant cash flow benefit to the Exchequer in 2012 and our long-term debt sustainability is enhanced,' he said.
The deal could help ensure a swifter return for Ireland to the markets, but it will have no effect on another austerity Budget for the nation next year.. The deferred payment does not save the Government $4.1 billion, it simply means it will not be forced to take the money in cash from bailout funds.
No Irish Need Apply? Not anymore